The US energy sector experienced a slight downturn in activity as Baker Hughes Company reported a decrease in the number of oil and gas rigs for the second consecutive week. This marks the first decline since late June, indicating a potential shift in the industry’s strategy.
For the week ending August 23, the oil and gas rig count dropped by one to 585. This decline represents a 7% decrease compared to the same period last year, with a total reduction of 47 rigs.
While oil rigs maintained their count at 483, gas rigs saw a reduction of one to 97 this week. This decline in gas rig activity follows a trend observed earlier this year, where gas producers scaled back drilling after prices plunged to their lowest point in 3.5 years during February and March.
The overall reduction in rig count is attributed to several factors, including lower oil and gas prices, rising costs, and a growing focus on debt reduction and maximizing shareholder returns. These factors have contributed to a significant drop in the rig count over the past year, following the significant increases seen in 2021 and 2022.
Despite the decline, the US oil sector is still expected to see increased production in the coming years, driven by rising oil prices. The Energy Information Administration (EIA) projects that US crude output will rise from a record 12.9 million barrels per day (bpd) in 2023 to 13.2 million bpd in 2024 and 13.7 million bpd in 2025.
For investors seeking exposure to the oil services sector, two ETFs offer potential opportunities: the VanEck Oil Services ETF (OIH) and the IShares U.S. Oil Equipment & Services ETF (IEZ).
Baker Hughes Company’s stock (BKR) experienced a positive performance on Monday, closing at $35.69, representing a 1.33% increase.
